South Korea halts Iranian oil imports as sanction waivers cease

Time: June 17, 2019  

South Korea’s top refiner SK Energy’s main factory is seen in Ulsan, about 410 km (southeast of Seoul. (REUTERS/File Photo)
  • Government plans to extend freight rebates for shipments of non-Middle East crude to the end of 2021

SEOUL: South Korea has turned to alternative sources to replace its oil imports from Iran, which were halted in May when waivers on US sanctions against the Islamic republic expired, officials told Arab News on Sunday.

South Korea is the world’s fifth-largest crude oil importer, and was one of the countries granted a waiver by the US when President Donald Trump’s administration re-imposed sanctions on Iran last November.

Customs data shows South Korea’s imports of Iranian crude for January through May were 3.87 million tonnes, or 187,179 barrels per day (bpd), compared to 5.45 million tonnes over the same period last year.

South Korea is the biggest buyer of Iranian condensate, an ultra-light oil that is low in sulfur and produces no residue, and is used as a raw material for the manufacture of petrochemicals. Iranian condensate is also cheaper than condensate from other countries, such as Qatar, and provides a higher yield of heavy naptha — , a raw material for the production of petrochemicals including paraxylene, which is used the manufacture of plastic bottles.

SK Incheon Petrochem, Hyundai Oilbank and Hanwha Total Petrochemical have turned to other countries, including Qatar and Russia, to replace Iranian condensate, according to industry sources.

Last year, South Korea bought and tested as many as 23 different types of condensate from 15 countries as possible substitutes for condensate from Iran, at a cost of around $9 billion, government and trade data
showed.

South Korean petrochemical makers bought condensate from gas fields in Africa and Europe, in addition to tapping more supplies from Qatar, Saudi Arabia, the US and Australia.

“We’ve increased imports of condensate from Qatar, Australia and Russia,” an employee of Hanwha Total Petrochemical told Arab News, on condition of anonymity. “We also started buying oil from the Republic of Equatorial Guinea.”

The refiner has also raised its imports of heavy naphtha in the absence of Iranian condensate, he added.

According to customs data, South Korea’s Qatari crude oil imports rose 10.1 percent year-on-year to 660,752 tonnes, or 155,596 bpd in May, while oil shipments from Saudi Arabia rose 5.1 percent to 3.39 million tonnes, or 798,695 bpd. Meanwhile, imports of crude oil from the US more than tripled.

In an effort to help local refiners find alternative oil supplies, the South Korean government plans to extend freight rebates for shipments of non-Middle East crude to the end of 2021, according to the Ministry of Trade, Industry and Energy.

This article was first published in Arab News

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‘Nafthah’ — an art exhibition on the history of oil in Saudi Arabia

07/06/19

  • Fourteen artists are participating in the exhibition dubbed “Nafthah”

JEDDAH: The Ministry of Culture will organize an extraordinary art exhibition that looks at the cultural impact that oil has left on the history of Saudi Arabia.

Scheduled on June 8 until July 18, 2019 at the historic Khuzam Palace in Jeddah, the exhibition dubbed “Nafthah” showcases the first oil exploration agreement between the Kingdom and the United States in 1933. Fourteen artists are participating in the exhibition dubbed “Nafthah”.

This discovery oil in the Kingdom resulted in a social and economic transformation that made Khuzam Palace a gateway to development.

The Ministry of Culture aims to highlight the Kingdom’s modern past in an innovative and fresh creative approach, where artists express their own reflections on this great history and their vision of the positive and cultural impact it has left on Saudi society.

This article was first published in Arab News

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Uncaged bears see oil prices make fast retreat

Time: October 13, 2018 

Oil prices and stock markets went into a steep decline over the past week, as international organizations warned of growing signs of weakness in the global economy.

Midweek, the bears were uncaged, and Brent crude fell $5 per barrel. But stability prevailed by the end of the week. Brent started the week at $84.16 per barrel and settled at $80.43 on Friday, while WTI fell from $74.34 to $71.51.

Oil prices fell despite renewed dips in Libya’s crude oil output. A major factor in the oil price tumble was an Oct. 8 report from the IMF, in which it downgraded global economic growth forecasts for 2018 and 2019 to 3.7 percent per annum, from 3.9 percent, which would consequently lower oil demand.

Market participants justified the downward movement in oil prices as a correction of earlier midweek highs. Additionally, global stock markets took a plunge and there were bearish figures from OPEC, the International Energy Agency (IEA) and the US Energy Information Administration (EIA). OPEC emphasized that “the market remains well supplied” and that “projections for 2019 clearly show a possible rebuild of stocks.”

On Monday, Hurricane Michael shut down around 40 percent of the US Gulf coast oil output and on Tuesday halted operations from the US’ largest crude oil export terminal, the Louisiana Offshore Oil Port. But the hurricane was fast moving and any concerns surrounding production immediately turned to fears for demand. The impact of lower demand will however be very minimal.

A major factor in the oil price tumble was an Oct. 8 report from the IMF, in which it downgraded global economic growth forecasts for 2018 and 2019 to 3.7 percent per annum, from 3.9 percent, which would consequently lower oil demand.

Faisal Mrza

The IEA monthly oil market report published on Oct. 13 came with a strange, premature suggestion that “expensive energy is back.” The IEA report came out right after the IMF’s lowering of the forecast for global economic growth. Both of the reports implied that the health of the world economy is in doubt.

The IEA forecast that the demand growth for oil in 2018 and 2019 will be reduced for both years by 110,000 barrels per day (bpd) to 1.3 million and 1.4 million bpd, respectively. The IEA stated that the global oil supply is growing fast. In September, world oil production, at around 100 million bpd, was 2.6 million bpd higher than a year ago. The IEA also noted that refiners are facing increased competition as capacity additions surge between now and the end of next year. Trade concerns loom large as well, with signs that China’s economy is slowing down as US trade tariffs start to bite.

After the IEA downgraded its oil demand forecast for 2019 from 1.4 to 1.3 million barrels per day, bearish comments began. However, a few voices tried to remind the market that worries of an oil supply crunch toward the end of this year are very real. Two Indian oil companies hope to import Iranian oil in November despite the threat of sanctions. Negotiations will likely continue right up to the November deadline.

  • Faisal Mrza is an energy and oil market adviser. He was formerly with OPEC and Saudi Aramco. Reach him on Twitter: @faisalmrza

  

This article was first published in Arab News

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S&P expects stable growth in Saudi Arabia

Time: October 06, 2018  

 

  • Oil price boosts government spending
  • Debt under control

LONDON: The Saudi economy is expected to grow at an average of more than 2 percent between 2019 to 2021 according to the S&P ratings agency.
Affirming the country’s long and short term sovereign ratings, it said that higher than expected revenues generated by the stronger oil price have been met with higher spending but that the government would take steps to consolidate public finances over the next two years.
“We continue to anticipate that public investment will increase under a four-year stimulus plan whose goal is to stabilize private sector demand, even as the government moves on other fiscal consolidation measures such as energy tariff hikes,” the agency said in a statement.
S&P also said that it expected an increase in net general government debt of about 2 percent of GDP between 2018 to 2021, down from 3 percent in its previous review.
The rebounding oil price has helped to improve the budgetary positions of regional oil exporters such as Saudi Arabia, the UAE and Oman.
However it has set alarm bells ringing in some energy importing countries with pressure mounting on OPEC to pump more oil to keep a lid on energy inflation.
In a wide ranging interview with Bloomberg this week, Saudi Crown Prince Mohammed bin Salman that the oil price was determined by market forces.
“We never in the history of Saudi Arabia decided that this is the right or wrong oil price,” he said.
“The oil price depends on trade — consumer and supplier — and they decide the oil price based on trade and supply and demand. What we are committed in Saudi Arabia is to make sure there is no shortage of supply. So we work with our allies in OPEC and also non-OPEC countries to be sure that we have a sustainable supply of oil and there is no shortage and that there is good demand, that it will not create problems for the consumers and their plans and development.”
He also clarified that Saudi Arabia had spare capacity of 1.3 million barrels without the need for further investment.

This article was first published in Arab News

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Saudi Prince Sees Deal With Kuwait to Restart Oil Fields ‘Soon’

Time: October 05, 2018      

Saudi Arabia’s crown prince said he’s getting close to
striking a deal with Kuwait about two jointly owned fields that can produce
half a million barrels a day of crude.

“We believe that we are almost close to having something
with Kuwait,” Crown Prince Mohammed Bin Salman, who met with Kuwait’s Emir
Sheikh Sabah Al-Ahmed Al-Sabah on Sunday, said in an interview at a royal
palace in Riyadh. “We believe we can have something soon.”

The fields of Khafji and Wafra are located in Neutral Zone,
a portion of the two countries’ border that has been undefined for almost a
century. The long-standing question of sovereignty over the area remains
unresolved, but Prince Mohammed said resuming production is still possible.

Restarting the fields could help Saudi Arabia boost
production just as a supply shortfall emerges due to U.S. sanctions on Iran.
U.S. President Donald Trump has repeatedly demanded that the Organization of
Petroleum Exporting Countries takes action to lower prices. Trump and Saudi
King Salman bin Abdulaziz on Saturday discussed efforts to maintain supplies.

Additional Capacity

Saudi Arabia currently has 1.3 million barrels a day of
spare capacity ready to be used if the market needs it, Prince Mohammed said.
Output from the oil fields in the Neutral Zone would provide additional
capacity, he said.

U.S. sanctions on Iran could remove as much as 1.5 million
barrels a day of crude from the market. Saudi Arabia and Russia have already
boosted output by about 1 million barrels a day since June, so even one of the
Neutral Zone fields could make up for a significant proportion of the remaining
shortfall.

“We’re trying to convince the Kuwaitis to talk about the
sovereignty issues, while continuing to produce until we solve that issue,” the
crown prince said.

‘Sovereignty Issues’

Prince Mohammed said a faction of the Kuwaiti leadership has
accepted the Saudi proposal to resume output from the Neutral Zone while
pursuing talks to resolve lingering problems. Another group insists on
resolving issues of sovereignty before restarting operations, he said.

When the border between the two countries was drawn in 1922,
the question of which state should have control of this stretch of desert along
the Persian Gulf was undefined. That situation persisted for decades, but
didn’t prove to be an obstacle to the discovery and development of a large
deposit of oil in the area.

However, Khafji closed in October 2014 due to unspecified
environmental concerns, while Wafra, which Chevron Corp. operates on behalf of
Saudi Arabia, shut down in May 2015 because of difficulties in securing work
permits and access to equipment. The fields have a combined capacity of more
than 500,000 barrels a day.

“We think a 50-year-old issue is almost impossible to fix in
a few weeks. So we’re trying to have an agreement with the Kuwaitis to continue
to produce for the next five to 10 years and at the same time, we work on the
sovereignty issues,” he said. “It’s good for Kuwait and Saudi Arabia, so I
believe it’s a matter of time until it’s solved.”

Disputes about the area span over a number of issues. Talks
have been stalling over the role of Chevron, particularly after Saudi Arabia
unilaterally renewed the company’s concession for Wafra in 2009 for another 30
years. Another issue was to do with Kuwait’s plans to build an oil refinery at
Al Zour, which faced delays because part of that area is used by Chevron.

This article was first published in AlRiyadh Daily

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Oil prices enter the danger zone for consumers: Kemp

Time: October 04, 2018   

A storage tank is seen at Ecopetrol's Castilla oil rig platform, in Castilla La Nueva, Colombia June 26, 2018.

A storage tank is seen at Ecopetrol’s Castilla oil rig platform, in Castilla La Nueva, Colombia June 26, 2018.

Recent price moves bear a strong resemblance to previous price spikes in 2007-2008 and 2010-2012

(John Kemp is a Reuters market analyst. The views expressed are his own)

LONDON- Crude oil prices continue to climb despite attempts by oil producers to reassure the market about availability and the existence of enough spare capacity to offset oil lost as a result of U.S. sanctions on Iran.

Recent price moves bear a strong resemblance to previous price spikes in 2007-2008 and 2010-2012, especially if prices are expressed in euros or yen to eliminate the impact of a stronger dollar this time around.

Brent crude has risen to almost 75 euros per barrel, the same level it reached in May 2008, on its way to a peak of 93 euros in July 2008 (https://tmsnrt.rs/2OzVObC).

Front-month futures have also hit 9,800 yen per barrel, the same as in October 2007, on their way to a peak of 15,300 yen in July 2008.

Prices in Indian rupees are already at the same level that they peaked in 2008 and on the way to the record set in 2013.

Only the strength of the dollar against other currencies is masking how high prices have become in oil-consuming countries outside the United States.

Prices have already risen to a level that has contributed to a slowdown in economic growth and oil consumption in the past.

“Expensive energy is back at a bad time for the global economy,” the chief executive of the International Energy Agency has warned (“IEA boss urges oil producers to ease supply concerns”, Reuters, Oct. 4).

“It is now high time for all the players, especially those key producers and oil exporters, to consider the situation and take the right steps to comfort the market,” he added.

The blame-shifting game is well underway, with the United States blaming OPEC, Russia faulting U.S. sanctions, and Saudi Arabia blaming speculators for escalating prices.

In reality, U.S. sanctions, output restrictions by OPEC and its allies, strong consumption growth and position building among the hedge funds have all contributed to the price surge.

Aggressive implementation of U.S. sanctions on Iran has left refiners and traders concerned about the future availability of crude and questioning whether OPEC will still have enough spare capacity to offset any other losses.

OPEC and its allies became fixated on cutting oil inventories down to the five-year average and waited far too long to start exiting from production curbs, causing the market to overtighten.

And oil consumption has grown much faster than most analysts forecast at the start of the year, while many non-OPEC sources of supply have risen more slowly than expected.

Despite communications between policymakers in the United States, Saudi Arabia and Russia to synchronise output increases with the re-introduction of sanctions there seem to have been a series of misunderstandings.

Policymakers appear to have misjudged how quickly the United States would try to cut Iran’s exports and how rapidly other OPEC and non-OPEC producers could fill the gap.

Sensing the market is moving into a cyclical period of under-supply and low spare capacity, hedge funds and other money managers have built bullish long positions, accelerating and exaggerating the price adjustment.

LOCKED MARKET

The oil market has become locked in an upward price trend as hedge funds and market makers all try to maintain neutral or long positions and few speculative players are willing to take the short side of the market.

Hedge funds and other money managers have accumulated bullish long positions betting on a further rise in prices amounting to almost 1.2 billion barrels of oil.

At the same time, the number of short positions in the six most important petroleum futures and options contracts has fallen to its lowest level since before 2013.

The imbalance between bullish and bearish positions is close to a record, an analysis of regulatory and exchange data showed.

Lopsided positioning has often been the precursor to a sharp reversal in the price trend when fund managers attempt to realise profits by closing some positions.

The impact of lopsided positioning on the evolution of prices has been explored by researchers including the physicist Didier Sornette (“Why stock markets crash: critical events in complex financial systems”, 2017).

But while lopsided positioning is a key signal for a future price reversal it does not indicate how quickly that reversal will take place and at what price level it will occur.

In 2007/08, oil prices continued trending higher for some months, even as analysts warned they had become unsustainable.

Oil prices tend to overshoot on the upside (2008 and 2011) just as they have done on the downside (1998, 2009 and 2016) before correcting.

Typically, prices peak only once there is clear evidence of a slowdown in oil consumption growth and/or OPEC producers come under intense political pressure to increase production.

In the meantime, oil prices have risen to a level that is sending a strong signal to non-dollar consumers about the need to increase efficiency, reduce use and switch to alternative fuels.

This article was first published in Zawya

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Analysis: Saudi Arabia could be vital to fuel oil’s hazy future

Time: 07 September, 2018

HIGHLIGHTS

Saudi could replace crude with fuel oil for power generation

Demand to rise as desalination capacity grows

Could help clear excess fuel oil post 2020

London — The world’s largest crude oil exporter could be the answer to the quandary that awaits the high sulfur fuel oil market once interest for this product wanes due to implementation of a global marine sulfur cap.

As demand shifts away from 3.5% HSFO in the bunker market to cleaner marine fuels due to the International Maritime Organization’s global 0.5% marine sulfur cap from 2020, Saudi Arabia could emerge as one of the main outlets for this product.

Related podcast: Saudi fuel oil demand could support European exports year-round

Resurgent Saudi Arabian demand has been the driving force behind the strength of the European fuel oil complex this summer, with demand centred on power generation for desalination and to meet increased air-conditioning requirements in the summer months.

Traditionally, the fuel oil arbitrage from Europe into the Red Sea is a seasonal summer trend from April to October when Saudi Arabia and other Middle Eastern nations buy fuel oil to power air-conditioning. But with Saudi significantly increasing its desalination capacity, buying interest is expected to emerge even in the winter months.

From 2020 onwards, excess HSFO will need to find a home, with S&P Global Platts Analytics expecting an initial displacement of about 3 million b/d of the product.

Analysts believe the power sector could end up playing a pivotal role in propping up the fuel oil market even though environmental policies in some countries might prevent this from becoming a major trend.

Goldman Sachs in its recent report ‘IMO 2020 — Challenging but Solvable,’ said Saudi demand could help substitute fuel oil for crude in power generation.

“Saudi Arabia — who stands to lose from the IMO regulation given the elevated sulfur content of its crude — offers the largest potential source of such fuel oil absorption in our view,” the Goldman Sachs report said.

Countries like Pakistan, Bangladesh, Iraq and Iran could also be potential candidates for such substitution as supply outweighs demand.

“I think cost is the main driver for energy options. In the absence of stringent environmental regulations, cheap and polluting fuels will certainly find a market regardless of their environmental impact,” said Yousef Alshammari, CEO of UCERGY Analysts.

Saudi Arabian fuel oil consumption has been growing over the last three years and liquid fuels continue to account for half of the kingdom’s energy mix, despite a commitment to raising gas production.

DESALINATION DRIVE

Saudi uses domestically produced crude for power generation and at its desalination plants, although cheap fuel oil is an attractive alternative feedstock when the kingdom is looking to sell crude at a premium.

Earlier this year, the kingdom announced plans to build nine desalination plants in the Red Sea area, with some of these units already online, according to market sources.

A source close to the energy ministry told S&P Global Platts that there are a total of 31 desalination plant projects in the country. “Four are under study, two are under construction, and five are private. The rest are all operational,” the source said.

Saudi Arabia has the world’s largest desalination capacity, accounting for around a fifth of global capacity, the International Water Summit said in a recent report titled 2018 Energy Efficient Desalination report.

With fuel oil prices expected to decline sharply post 2020 as demand slides for HSFO, the market is banking on the Middle East to take advantage of cheap fuel oil cargoes for power generation.

–Eleni Pittalis, eleni.pittalis@spglobal.com

–Eklavya Gupte, eklavya.gupte@spglobal.com

–Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com

This article was first published in S&P Global Platts

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Barclays hikes oil price forecast to $75 by 2020

September 04, 2018

LONDON-

Barclays, a British multinational investment bank and financial services company, has revised its Brent price forecast for 2020 markedly upward from $55 to $75 per barrel, it said in its latest Oil Special Report.

Barclays remains bullish on prices by 2025, yet it has raised its target from $70 to $80 per barrel, around $15 higher than the curve.

Medium-term oil price modelling requires a certain amount of humility, Barclays said, adding that it tested how prices might react and forecast a range between $68 and $81 in 2020 and between $69 and $85 by 2025.

This article was first published in  Trade Arabia

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Can the US shale boom last? Answers to BP and Aramco, please

August 16, 2018

FRANK KANE

The US shale industry appears to be on an unstoppable growth path. Just in the past few months there have been a flurry of big-ticket deals in the business, mostly centered on its global hub in Texas and New Mexico, and, if the financiers are to be believed, there are more to come.

But two basic questions remain: First, have the oil companies, who have seen boom-and-bust in US shale in the past, got the economics of shale production right this time?

And second, if the answer to that one is in the positive, should other producers, even the likes of Saudi Aramco, the biggest conventional crude exporter, get in on the act now before it is too late?

Commentators are talking of a looming “deal frenzy” in the Permian basin in the US Southwest as medium-sized operators launched a spate of consolidation, and bigger players entered the arena for the first time.

That is quite a change from the way the shale industry has traditionally operated in the US. In the past, small independent operators have simply loaded up the truck and headed out to the fields when the oil price hit a level — between $50 and $60 a barrel — that justified their investment.

That was the origin of the shale boom in the early 2000s as oil began to rise. Operators were nimble and cost-aware, and were essentially in it for the short-term gain that could be earned from higher oil prices.

The downside, of course, is that they packed up their gear and headed back to Houston when the oil price fell, nursing losses and debts that dissuaded many from ever trying again.

Technology and finance have apparently altered that cycle. Innovative techniques in both have meant that more oil and capital can be accessed more efficiently, allowing the big oil companies to take on a longer term approach to shale.

In the process they have revolutionized the shale business, and the global energy market. The Permian alone produced 3.42 million barrels per day in September, or nearly 4 percent of total global oil output, helping the US to remain the second biggest oil producer in the world and a net exporter.

Underlining shale’s new global role, some energy experts even believe that production can be ramped up fast enough and to such levels to offset looming declines in oil production as a result of the US embargo on Iranian oil exports set to take effect in November.

Probably the most significant of the recent deals was the $10.5 billion acquisition last month by BP of the shale assets held by commodities group BHP Billiton. Not only was it the biggest in cash terms, but it was laden with historical symbolism for the British company.

It was BP’s biggest acquisition since it bought Amoco in 1998, and it marked the return of BP to US expansion for the first time since the trauma of the Deepwater Horizon tragedy in 2010. Paying for the clean-up of that disaster in the Gulf of Mexico, and the punitive penalties levied on BP, totaled around $67 billion over eight years, but are now reducing.

It’s also symbolic that BP’s return to the US is not to its traditional offshore stamping ground, but to the heart of the shale domain in the Permian and nearby fields.

BP has obviously decided that it can equal the performance of local shale operators in terms of nimbleness, but at the same time bring the weight of heavy capital investment to bear to expand efficiency and productivity.

Not everyone shares BP’s confidence. Some industry experts believe that shale is overhyped, the latest example of American “irrational exuberance,” and that it will inevitably have negative consequences for the global oil price. Others point to bottlenecks in the US pipeline and transpiration systems as reasons to doubt it will transform the global picture.

So, against this background, should the bigger conventional crude companies, like Saudi Aramco, be eyeing the Permian as an avenue for diversification? Executives at the Saudi giant have dropped hints that they might indeed be looking at US shale, but so far no deals have come to fruition.

Probably more likely for Aramco is a big boost to its unconventional oil and gas investment in the Kingdom itself. The big shale gas reserves at Jafurah in southeastern Saudi Arabia have long held out promise, but it has not yet been possible to make the financial sums work on an economically significant scale.

Aramco has a lot on its plate domestically at the moment, with the potential purchase of a stake in Saudi Basic Industries Corporation to create a new force in global petrochemicals. It has to weigh up whether a move in US shale now would be a distraction from those big strategic plans.

  • Frank Kane is an award-winning business journalist based in Dubai. Twitter: @frankkanedubai
Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News’ point-of-view

This article was first published in  ARAB NEWS

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How Saudi Arabia is putting its money on tech for life after oil

August 13, 2018

Saudi Arabia, the world’s biggest crude exporter, is attempting to future-proof itself against oil’s decline by investing in futuristic technologies

Saudi Arabia has accumulated a stake in electric car maker Tesla for about $2 billion through its Public Investment Fund and aims to be part of any investor pool that emerges to take the company private.

The world’s biggest crude exporter is attempting to future-proof itself against oil’s decline by investing in futuristic technologies.

Saudi Arabia has accumulated a stake in electric car maker Tesla for about $2 billion through its Public Investment Fund and aims to be part of any investor pool that emerges to take the company private.

That’s on top of a $3.5 billion investment in ride-sharing company Uber Technologies, a $45 billion commitment to SoftBank Group Corp’s $100 billion technology fund and a planned investment of about $1 billion in Virgin Group’s space companies.

Neom, a planned $500 billion futuristic city that it’s hoped will host more robots than people on a desolate peninsula in the kingdom’s northwest is also part of the plan.

The metropolis will have a link “with artificial intelligence, with the internet of things — everything,” Crown Prince Mohammed bin Salman said in October, when Neom was announced.

The project includes a bridge spanning the Red Sea, connecting the proposed city to Egypt and the rest of Africa. Critics of the Neom plan point to past failed attempts to overhaul the Saudi economy that also included industrial cities in the desert.

While the International Energy Agency sees oil demand rising more than 10 percent to 103.5 million barrels a day by 2040, advances in vehicle efficiency, the rise of electric cars, tighter emissions standards and shifts to other fuel sources would result in crude demand much lower than the industry is banking on.

About 60 percent of oil is used in transportation, which is also where the biggest technological changes are emerging.

Diversifying the biggest Arab economy away from oil is central to the government’s Vision 2030 program and investments by its sovereign-wealth fund are a key component.

The government has called for shares to be sold in state oil company Saudi Aramco and for the PIF to become the world’s biggest sovereign-wealth fund, ultimately controlling more than $2 trillion.

As part of its Virgin Group deal, the PIF will invest in Virgin Galactic, The Spaceship Co and Virgin Orbit and have the option to invest an additional $480 million in the group’s space services, it said in October.

Saudi Arabia plans to support the ventures’ plans for human spaceflight and launching satellites into orbit and may cooperate with Virgin to create what the kingdom called a “space-centric entertainment industry” in the country.

The investment reflects the strides Saudi Arabia is making toward a “diversified, knowledge-based economy” by investing in “those sectors and technologies that are driving progress on a global scale,” the Crown Prince said when announcing the deal.

This article was first published in  arabian Business

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